History of Student Aid

Journal of Student Financial Aid
Volume 44 | Issue 1
Article 4
7-25-2014
A History of Financial Aid to Students

Matthew B. Fuller
Sam Houston State University, mbf005@shsu.edu
Follow this and additional works at: http://publications.nasfaa.org/jsfa

Part of the Higher Education Administration Commons
Recommended Citation
Fuller, Matthew B. (2014) "A History of Financial Aid to Students," Journal of Student Financial Aid: Vol. 44: Iss. 1, Article 4.
Available at: http://publications.nasfaa.org/jsfa/vol44/iss1/4
This Issue Article is brought to you for free and open access by NASFAA Research Publications. It has been accepted for inclusion in Journal of Student
Financial Aid by an authorized administrator of NASFAA Research Publications. For more information, please contact jacob.gross@louisville.edu.

Cover Page Footnote
The author would like to acknowledge Ms. Patsy Collins and Ms. Brandi Jones to their contributions in
reviewing and providing guidance on this article.
This issue article is available in Journal of Student Financial Aid: http://publications.nasfaa.org/jsfa/vol44/iss1/4

By Matthew B. Fuller
Matthew B. Fuller is
assistant professor
and coordinator for
Higher Education
Administration,
Educational Leadership
and Counseling at
Sam Houston State
University.
Colleges, universities, and the communities they serve have always

been concerned about students abilities to pay and the systems of aid
to support students learning. This article reviews the history of
aiding student in higher education. Early student- and institutionally-led programs are discussed along with initial philanthropic and
charitable efforts. The author argues that the nature of financial aid
has shifted from a locally-drive philanthropic effort, to a complex
federal system, and, finally, to a system focused on political discourse.
After describing this shift, the author discusses implications for the
stability of financial aid and higher education in America.
Key Words: History, financial aid, loans, philanthropy
he National Center for Educational Statistics (2012) estimated that

fifty-five percent (11.5 million students) of college and vocational
program students received some form of financial aid in 2010. This
percentage increased when accounting for college or university students
only; seventy-four percent of college and university students received some
form of financial aid in 2010 (NCES, 2012). Financial aid has become a
fundamental expectation of students and institutions. The history of how
Americas system of financial aid developed to a point where nearly threequarters of college or university students take financial aid warrants further
consideration of scholars and practitioners in the field.
This manuscript analyzes several primary and secondary sources to
provide a broad overview of the long and storied history of how societies
provided aid to higher education students. Furthermore, it describes and
analyzes how a variety of historical episodes demonstrate the manner in
which aid evolved as a result of higher education and societal developments, and signals the emergence of a political agenda-based philosophy of
student aid. Reviewing these historical episodes reveals that student financial
aid has evolved from local, mostly philanthropic efforts, to a nationwide
system of aid, interconnected and responsive to changes in American
higher education and society. Traditional scholarship has focused on
applications and debates between need-based and merit-based philosophies
of financial aid. This manuscript reviews historical evidence to discuss a
shift from local, philanthropic efforts to government control and outlines
how contemporary financial aid is increasingly driven by political priorities
rather than student need or merit.
42
Volume 44 Number 1 2014
These analyses better situate financial aid practitioners in understanding

their profession and calling upon history to reflect upon current financial
aid polices and philosophies. The manuscript is written in a loose chronological order. The complexities of financial aid do not allow for a perfect
chronology of events since several movements within and outside of
financial aid and higher education evolved simultaneously or separately.
Wherever possible, primary sources of historical evidence were used in the
research and writing of this document. Contemporary popular press and
legislative sources served not as definitive scholarly evidence, but to depict
the historic contexts of financial aid and social discourse in America.
Despite efforts to present an exhaustive review of the history of financial
aid, it would be nearly impossible to cover the entire topic in full detail.
The financial aid of each period of higher education is a subject of its
own, worthy of further review by scholars and practitioners desiring a
more clear understanding of the foundations of financial aid.
Nonetheless, if one traces the historical evidence of financial aid, one
finds a unique story that speaks to the manner in which institutions,
students, policy-makers, and society inter-relate and respond to the contexts of their day. One also finds a complex, evolving system of philanthropic programs, scholarships, grants, and loans aimed at supporting the
educational pursuits of students. Throughout its history, financial aid has
had a tremendous influence on institutional quality, accreditation, enrollment, admissions, teaching, research, physical infrastructure, and institutional policies, to name a few. Viewing financial aids history allows scholars
and practitioners to understand how institutions and policy makers have
responded to external pressures, how they have advocated for student
access to education, and how society has sought and achieved the goals it
espouses for an educated citizenry. Like much of Americas higher education history, one must first consider the religious foundations of patronage
and philanthropy in medieval European universities to understand the
foundations of financial aid in the U.S.
Sponsorship
and Charity
in Western
Medieval
Universities
Understanding how professors were paid offers key considerations in

understanding student financial aid systems in medieval universities. Three
sources of financial support were generally recognized in these early
institutions: student-paid, church-paid, and crown- or state-paid (Thelin,
2011; Wilkinson, 2005). For example, at the oldest, continually running
university to grant degrees throughout its entire historythe University of
Bolognastudents directly hired professors for their services. How
students raised the necessary capital to pay for these services was usually a
function of family income. However, student financial needs also led to a
unique system of pooling financial resources. In the 1100s, the University
of Bologna was a mecca for intellectual and cultural life and students came
from across Europe to study with preeminent scholars (Long, 1994).
Bolognese professors were not organized into a university in the modern
sense of the term. Instead, each professor operated more or less as a
freelance instructor, offering courses of his own design and charging
whatever fees students were willing to pay. If a professor offered antiquated, irrelevant classes or was a poor, abusive, or belittling instructor,
students simply went to another professor, taking their payments with
National Association of Student Financial Aid Administrators
43
them. Professors only got paid if students found their courses worth
taking and if they limited the cost of their courses. This system not only
ensured professors offered relevant, well-taught, and supportive classes, it
led to an institutional economy driven by the proverbial invisble hand of
competition (Long, 1994).
As Bologna became crowded with foreign students and local citizens,
professors imposed rules aimed at drawing down the number of foreign
students (Long, 1994). Under this system, foreign students were held
responsible for the debts of fellow countrymen. For example, if an
English student owed money to a Bolognese citizen or faculty member but
left before paying that debt, other English students were made to pay the
original debt. As a result, foreign students banded together into an association referred to as a nation with all English students comprising one nation,
all French students comprising another, and so forth (Long, 1994). As
situations arose where a student needed assistance paying off a financial
debt, members of the nation supported the need through pooled resources
kept in loan chests by senior students. Eventually, these nations pooled
resources to support student debts and needs related to schooling, supporting those who could not afford a full course of study. These early
practices were, thus, need-based and were the root of an ethos of aiding
students in educational pursuits.
The pattern of aiding poor clerksstudents of theology bound for
ministerial lifewas well established in England by the Thirteenth Century
(Wilkinson, 2005). However, the types of aid to poor students varied,
from free places given in return for doing college chores to access to
kitchen leftovers to a license to beg like a mendicant priest (Wilkinson,
2005, p. 65). Poor students were frequently made to work their way
through college, often through apprenticeships, labor positions, or as
servants to professors (Cobban, 2002). However, efforts the modern
student would recognize as scholarships were also employed. On the whole,
these scholarships were not usually awarded through competition or on
basis of merit or need, but as gifts between wealthy families, excluding the
neediest of students (Sears, 1922). However, Wilkinson (2005) noted that
the starting point [of an ethic of aid to students] was Jesus care of the
poor and afflicted, linked to the idea of supporting pious learning (p. 65).
Those families that could afford to do so found it pious and comforting to
assist in the educational pursuits of poor students. Thus, from its earliest
days, student aid included the notion that enterprising studentsespecially
poor studentsought to be able to improve their situation in society and
patronage of this effort was good and virtuous. This overarching ethos of
patronage and charity in medieval Europe was the root of charitable colleges
and charitable chaplains (Rubin, 1987). Wealthy benefactors would give
monetary scholarships to poorer students in exchange for acts of mercy or
penance. For example, in 1257, the executors of William Kilkenny, the late
bishop of Ely, gave 200 marks to support two students of theology at
Cambridge University who were to pray for Kilkennys soul and do good
deeds in his name (Clark, 1897). Similar endowments were left to various
colleges and priories associated with Cambridge and Oxford (Cobban,
2002).
44
These religious foundations of patronage shaped the way colleges,

universities, faculty, and administrators operated for centuries to come.
Early accounts by senior faculty at medieval institutions recounted the
extensive work they did in securing funds from external supporters for
institutional needs and student support (Cobban, 2002; Rubin, 1987).
Universities, colleges, buildings, and programs were named in honor of
donors and fueled philanthropic giving as a sign of wealth and piety among
wealthy families (Wilkinson, 2005). Aid to poor students also resulted in
differentiated services (i.e. lower-cost housing and dining facilities for poor
students; higher-cost facilities for wealthy students) and dictated how
curricula and programs were specialized according to socio-economic
status (Wilkinson, 2005). Before the American colonies were established, a
system of aid to students was well underway in Europe, providing a general
pattern for American colonial colleges.
Financial Aid
in Colonial
America
The American system of higher education continued the tradition of

sponsorship, charity, and patronage established by European universities. It
was not until 1639, with the passing of Charlestown, MA minister John
Harvardwho left New College his entire library and half of his wealth,
or 780that New College had sufficient means to hire faculty, erect
buildings, and attract students. New College was rechristened as Harvard
College in 1639 and Newtown was renamed Cambridge, after the English
university John Harvard attended (Cobban, 2002).
Wealthy colonists played important philanthropic roles in sponsorship
and patronage of grade schools and institutions of higher learning in the
Colonies. Acts such as the Old Field School Laws established an
overarching ethos of charity and support of schools as the standard way
of life among wealthy colonists (Urban & Wagoner, 2008). While such laws
and acts did not establish federal or state support of individual students,
they did contribute to the general sense that supporting students in their
educational pursuits was proper and advanced the vitality of the Colonies.
Cast in this context, wealthy patrons established endowed scholarships
for students. By 1643, Harvard had received funds for its first endowed
scholarship from Lady Anne Radcliffe Mowlson, who stipulated that
interest on her donation of 100 be used to aid poor students pursuit of
education (Mowlson, 1643). Following Lady Mowlsons example, a host of
Colonial elites made collegiate giving their primary philanthropic pursuit.
As with many ideas in higher education, the concept of the philanthropic
scholarship spread like wildfire from Cambridge. Scholarships were
established by early benefactors at William and Mary, Yale, Princeton, and
the University of Pennsylvania (Thelin, 2011).
During the Revolutionary War, colonists philanthropic efforts were
diverted from student aid toward military efforts. The general pattern of
scholarships was well established before the United States of America even
existed, and, as in England, was usually a matter of gifting between elite
families (Wilkinson, 2005). Wilkinson noted that the American Revolution
did not revolutionize student aid (p. 69). However, the Revolution did
influence patterns of student lending in two indirect ways. First, the
Revolution ushered in a burst of westward expansion, including the first
45
colleges operating west of the former colonial territories (Wilkinson,

2005). To fund this expansion, colleges had to maintain reasonable costs
and at least some form of charity or tuition aid to attract students. Second,
the Revolution discredited hereditary privilege and aristocratic exclusiveness (Wilkinson, 2005). Instead, the new countrys citizens favored a
commitment to the idea of an educated citizenry (Wilkinson, 2005, p.
70) and believed supporting students educational needs would reap
societal benefits. As Wilkinson (2005) noted, scholarship aid [following
the American Revolution] was at least as important symbolically, aligning
colleges with republican, antiaristocratic virtue, as for anything it did
materially for students (p. 70).
Financial Aid
in the New and
Industrializing
Nation
Transformation of the American way of life was unbridled from the

American Revolution through the conclusion of the War of 1812. Numerous changes in social, cultural, and industrial archetypes occurred, providing new pressures on higher education. In much the same way that the
Revolution expanded higher education westward, so did the Louisiana
Purchase of 1803 press the need for funds to support collegiate expansion.
Financial aid efforts were critical in this funding effort (Wilkinson, 2005).
However, financial support of institutions was generally still a matter of
philanthropic support from wealthy citizens devoted to supporting student
needs (Thelin, 2011). While scholarships were prevalent, a cogent, centrally
coordinated system of financial aid and a system to measure student merit
had yet to develop. As such, a students financial history remained the
primary means of assessing their need for financial aid. Harvard was the
first to develop a new system of financial aid that quickly advanced
throughout the nations institutions and eventually into the federal government.
In 1838, Harvard established a private student lending agency responsible for making zero-interest loans to students who could otherwise not
afford to attend. The program, known commonly as the Harvard Loan
Program, was a part of Harvards General Beneficiary Fund raised by
wealthy alumni and benefactors. Students seeking support through the loan
fund had to make their petition for such support to the university president by the first day of classes, stating what forms of aid they already had
or were expecting to receive from the University and, if under twenty-one
years of age, provide a written approval for taking out the loan from their
parents (Harvard University, 1874). Support of young men of ability to
[earn] an education, when their families are not able to help them, seems a
peculiarly judicious and useful charity (Harvard University, 1874, p. 13).
Similar loan programs spread from Harvard University to other Ivy League
and state colleges in the mid- to late-1800s (Cohen & Kisker, 2009; Thelin,
2011).
46
Connections
to Testing:
The Harvard
Scholarship
Exams
The period from 1870 to 1945 was characterized by transformations in

campus buildings and layouts, enrollment in higher education, and finance
of educational endeavors (Cohen & Kisker, 2009). In 1870, approximately
63,000 students were enrolled at 250 institutions of higher education in
America. By 1945, nearly 1.7 million students crowded into 1,768 colleges
and universities (Synder, 1993). During this period, academic disciplines
were also developing and focusing on new purposes for educating students. Industrialization in this period heightened the need for men skilled
in scientific approaches to agriculture, military sciences, psychology,
business, and education (Cohen & Kisker, 2009). This period also saw the
professionalization of many disciplines such as psychology, chemistry,
engineering, law, medicine, and education (Menand, 2001). Professional
organizations and, in higher education, accreditation agencies, were
founded and focused on admissions standards and criteria to determine
who should be allowed to practice in the disciplines. Many professional
agencies lacked a way to determine which students were intelligent enough
to warrant education in U.S. universities and colleges. Drawing from
experiences in military testing, psychology offered a solution that would
eventually form the foundation for scholarship and admissions exams in
American higher education.
Much has been said and written about the development of the field of
psychological testing through U.S. Army intelligence testing and sorting
programs (DuBois, 1970; Giardano, 2005; Gould, 1996; Gregory, 2004;
Lemann, 2000). However, testing also holds importance in the history of
financial aid as the nations oldest admissions test, the Scholastic Aptitude
Test, was first administered to identify the brightest entering students for
scholarships (Lemann, 2000). In 1933, James Bryant Conant became the
President of Harvard and almost immediately began a new scholarship
program for academically gifted boys. He delegated Henry Chauncey, then
an assistant dean at Harvard, the task of finding or creating an exam that
could rank candidates skills so that the most gifted students received these
scholarships. Chauncey had served as an Army test administrator and had
met one of the leading psychological measurement minds of his time, Carl
Brigham, developer of the Army Mental Tests (Lemann, 2000). In 1934,
Chauncey answered Conants call and, together with Brigham, took a
modified version of the Army Alpha Test and the Scholastic Aptitude Test
(S.A.T.) to Conant as a method to select the brightest scholarship applicants at Harvard based upon the students merits. In 1938, Chauncey
convinced the College Board to offer the S.A.T. as a standardized exam for
the purpose of identifying the brightest students for scholarships. By 1941,
the S.A.T. was administered to all incoming Harvard students as a requirement of admission. By 1944, all Ivy League schools and many prestigious
public institutions required minimum S.A.T. scores for admission and
scholarship awards (Lemann, 2000, p. 8-9). With the development of
admissions and scholarship examinations, measuring a students abilities
and merits became an alternative to need-based methods of awarding
financial aid.
47
A Growing
Sense of
Governmental
Provision
Concurrent with developing scholarship and loan systems, a system of

military pensions was developing that influenced student financial aid by
entrenching an ethos of governmental provision for individuals. Eventually
this sense of provision set the stage for the government to play an increased role in providing financial assistance for soldiers and citizens
higher education pursuits. Military pensions had been a part of Americas
history since the Revolutionary period. Even before George Washington
was able to assemble and train American military men, Congress enacted
the first American pension system to entice colonists to take up arms.
However, early financial troubles resulted in the denial of many Revolutionary War and War of 1812 pension applications (Clark, Craig, & Wilson,
2003; Veterans Administration, 1821). By the close of the Civil War,
however, the pattern for military pensions was relatively set and stable with
injured veterans, widows, and honorably discharged servicemen being
eligible for long-term financial support.
Governmental pension plans for military men and their widows did
more than pay soldiers for service to the country. They established a
general sense that the government should, to a growing extent, provide for
the financial well-being of its citizens, particularly its veterans. Nonetheless, government military pension programs have never been perfect.
Protests over unpaid benefits have followed every American War, the most
notable being the Bonus Expeditionary Force or Bonus Marchers from
World War I. In the spring and summer of 1932, an estimated 43,000
marchersWorld War I veterans and their familiesoccupied Washington, D.C. to protest the governments empty promises from the Bonus Act
of 1924. Ultimately, military men and tanks under the command of
Douglas MacArthur were mobilized to remove the veteran marchers and
burn their camps, killing two protesting veterans. Many, including Franklin
Roosevelt, criticized the fact that American troops were deployed against
American veterans exercising their right to protest and assembly. This
sentiment proved too steep for President Hoover to overcome and he lost
reelection to Roosevelt in 1932.
Having seen the damage wrought upon the government by the events of
1932, President Roosevelt wanted to avoid a second Bonus March (Humes,
2006). Reliable access and expectations of pensions provided a direct
motive for passing the Servicemens Readjustment Act of 1944. The fact
that servicemen were willing to march on the nations capital to demand
their pension payments indicates that pensions evolved from an individual
benefit to collective entitlement by the start of the Second World War.
First with veterans, and later with civilian citizens, the growing sense of
financial support and entitlement would provide the foundation for
financial aid in higher education that opened the campus gates and transformed American higher education forever.
Solidifying Aid
Systems: The
Servicemens
Readjustment
Act of 1942
48
That the Servicemens Readjustment Act of 1944, more commonly known

as the G.I. Bill, was a transformative watershed moment in the history of
higher education is an understatement. In the span of one decade after its
implementation (1944 to 1954), enrollment in American higher education
more than doubled from 1.15 million students to 2.45 million (Synder,
1993). The G.I. Bill positioned the federal government in the critical roles
of financier and coordinator of higher education for millions of Americans. Perhaps the greatest irony of the G.I. Bill is that even though it made
direct cash grant payments to veterans pursuing higher education, its
housing loan program served as a more apt pattern for future student loan
programs.
With images of the botched Bonus Act of 1924 on their minds, the
Senate and House drafted a non-bonus-based bill that allowed servicemen
to choose what and when to use three major benefits: (a) unemployment
benefits; (b) low-interest rate, no down payment housing loans; and (c)
stipends to support continued education and training. However, the Senate,
House, and President Roosevelt disagreed on various employment and
health care provisions discussed early in the Bills creation. Part of the
contention over employment was statistics for expected educational
enrollment and homeownership were presented definitively as undesirable
to most servicemen (Humes, 2006). In three different surveys between
1943 and 1945, the War Department sampled a cross-section of servicemen and determined that between seven and eight percent of servicemen
planned to capitalize on the education benefits being considered (Army
Service Forces, 1944; Olson, 1973). Policy makers and advisers also
assumed most veterans would return to their previous place of residence
and settle in apartment complexes in urban employment centers, making
housing benefits moot. While education and housing benefits were presumed to be non-issues, the debate over guaranteed employment set the
stage for a political battle that threatened the passage of the G.I. Bill
altogether (Olson, 1973). Post-War America simply did not have enough
jobs for millions of returning veterans.
Armed with survey data and stoked by heated debates in Congress, the
government expected results. Instead, it got consequences. Before the war,
college and homeownership were unattainable American Dreams and
fewer than half of the Pre-World War II servicemen had even graduated
from high school (Army Service Forces, 1944; Synder, 1993). By 1947,
veterans accounted for half of the college admissions in America (U.S.
Department of Veterans Affairs, 2012). Between 1944 and 1952, the
Department of Veterans Affairs had lent money on over 2.4 million
guaranteed, no-interest home loans to veterans. Ironically, few veterans
sought the employment provisions laid out in the Bill and less than 20% of
the funds set aside for that program were used (United States Department
of Veterans Affairs, 2012). In contrast, by the end of the programs in
1956, 2.2 million servicemen had capitalized on the educational benefits
offered by the Bill (Army Service Forces, 1944). The Depression era-boys
that went to War against the Axis came out as family men, homeowners,
and college graduates thanks to the massive federal investment in their
future (Humes, 2006).
The G.I. Bill had three direct effects on the nature of financial aid in the
United States. First, it formally established the now-familiar structure of
federal student support of servicemen, which later provided a precedent
for federal and private aid to non-enlisted citizens. In regards to student
lending, the G.I. Bill established low-interest, no down payment housing
49
loans, a precedent for low-interest student loans of latter decades. The G.I.
Bill also cemented the federal governments role as co-signer on housing
loans with veterans, fashioning the now-familiar guaranteed loan program
associated with federal student loans. On a deeper level, the G.I. Bill
solidified an approach to supporting higher education through students,
rather than directly to institutions. This philosophy would direct most
federal lending toward educational needs for the next two decades.
Second, the G.I. Bill established the policy of connecting institutional
quality to financial support through professional self-regulation and
accreditation. When the Bill was reauthorized in 1952 in preparation for
returning Korean Conflict veterans, the federal government provided
educational benefits only to veterans applying to high quality, accredited
institutions.
Finally, the Bill transformed the nature and structure of higher education. Virtually overnight, institutions had to accommodate many more
students from social classes that had previously been excluded from higher
education. The G.I. Bill provided impetus for the professionalization of
the student financial aid administrators role. Institutions needed trained
administrative professionals to manage the revenues and bureaucracy of
the massive federal investment in higher education. America also needed a
means of sorting the mass of students into appropriate programs and
institutions. Scholarship and admissions exams stood ready to suit this
need. As Cohen and Kisker (2009) noted, virtually every aspect of higher
education was fundamentally transformed by the G.I. Bill.
Post-G.I. Bill
Developments
Following the establishment of the G.I. Bill in 1944, the story of financial
aid in the United States is mainly one of exponential growth in student
enrollment and unprecedented fiscal investments in higher education. In
addition to this tremendous growth, the transformative period following
the Second World War also ushered in new discourses in quality and access
to higher education through the federal governments investment in higher
education. In each decade since the establishment of the G.I. Bill, the U.S.
government produced commission reports, Acts, or mandates questioning
the governments financial support of citizens education. In many respects, the post-G.I. Bill history of financial aid is a story of growing
societal discord with the cost and quality of a system of higher education
thought by many to be on the government dole (Wilkinson, 2005).
The Higher Education for American Democracy Report and Senate
Special Committee Investigation of National Defense Program (a.k.a. The
Truman Commission Report) were two prominent reports that questioned
the return on the governments investment in higher education and concerns of private profiteering, respectively. Both reports relied on site visits
to highlight issues in educational and military organizations. Among many
sweeping recommendations, the Truman Commission Report called for
federal and nation-wide support of scholarships, fellowships, and general
aid (Zook, 1947, p. 33) that were equitably distributed across the states
and different racial subgroups. However, the Truman Commission Report
did not offer or authorize specific frameworks for accomplishing this
50
coordinated effort. Instead, it focused on the needs of racial minorities

and poor students to obtain access to higher education.
Following the Trumann Commissions example, the Senate established a
Special Committee on Labor and Public Welfare with a Select Committee
to Investigate Educational, Training, and Loan Guaranty Programs under
the G.I. Bill (U.S. Congress, 1951). This Select Committee sent investigators out to institutions across the United States in much the same way the
Truman Commission Report did. Between 1950 and 1952, Select Committee investigators uncovered 258 institutions with problems, chief among
these being apparent flaws in institutional quality, an inability to teach
students anything of significance, and perhaps most egregiously, in the
eyes of investigators, overcharging of students on federal aid (U.S. Congress, 1951, Appendix D). This Special Committee Report was the first of
many arguing that federal lending and aid to students was increasing
college costs as campus leaders realized the untapped potential of resources available through federal aid.
To counter this argument, the Veterans Readjustment Assistance Act of
19521, a reauthorization of the Servicemens Readjustment Act of 1944,
offered a nuanced pattern for federal aid to Korean War Veterans. Rather
than pay benefits directly to students enrolling at any institution as the
original G.I. Bill did, the 1952 reauthorization provided educational
benefits to students enrolling only at institutions that met specific quality
criteria. Eligibility for federal educational assistance for veterans was
limited to students enrolling in institutions accredited by an organization
recognized by the U.S. Secretary of Education (Thelin, 2011). Rather than
establish a federal ministry of education for higher education institutions,
the 1952 Act established the federal governments reliance on accreditation
agencies to determine quality. In doing so, the federal government established the current system of access to federal funds through self-governance and peer review while also balancing its distance from higher
education oversight.
Similar provisions about institutional quality and access to federal funds
through student intermediaries were outlined in the National Defense
Education Act of 1958 [NDEA], an Act that invested $575 million in
accredited higher education institutions (Archibald, 2002; Cohen & Kisker,
2009). The NDEA also established the National Defense Student Loan
System, later named the National Direct Loan System and, eventually, the
Perkins Loan program. These loans were made directly from the federal
government to civilian and military graduate and undergraduate students in
areas supporting national defense on a basis of financial need. Fleming
(1960), however, noted many of the loans were awarded to students in
military sciences, engineering, science, math, and education regardless of
student financial need. As a revolving loan program, states were obligated
to deposit $405 million into loan accounts over the course of the program,
allowing future students to benefit after the NDEA concluded. Individually, these loans ranged from approximately $1,000 to $5,000 and were to
be repaid after graduation through a ten-year term and with a 3% interest
rate.
51
The National Defense Student Loan System also formalized a loan

forgiveness clause, the first of its kind for federal aid. To support growth
in education jobs, pre-service teaching students received a 15% reduction
in their loan payments for each year that they taught in a school. As one of
the early major federal attempts to lend civilians dollars for school attendance, the National Defense Student Loan System was successful in
opening the doors of higher education for many students previously
unable to attend college. In 1940, roughly 500,000 college-aged students
or 15% of their age groupattended college. Thanks to the G.I. Bill and
later the NDEA and its Loan System, the percentage of college-aged
students attending college in 1960 had swelled to 30% or four million
enrolled students (Fleming, 1960; Synder, 1993). The NDEA also marked
the beginning of the federal governments role in shaping the kinds of
students entering and graduating from colleges and universities, thus,
signaling the emergence of a priority- or agenda-based philosophy of aid
to students aimed at ensuring economic vitality and national security
through financial aid policy.
Developments in the private sector also refined the U.S. system of
student aid following the enactment of the G.I. Bill. In 1954, the College
Boards College Scholarship Service opened with the aim of providing low
income and minority students with funds to pursue higher education
(College Board, 2012). Applicants with financial need could complete a
profile form and staff at the College Scholarship Service would play
match-maker by providing information to colleges looking for such
candidates. This approach has been considered a precursor to the present
Free Application for Federal Student Aid (FAFSA), the primary means of
measuring student financial need. The College Scholarship Service was also
an early attempt to expand student aid to new sectors of society, namely,
low-income and minority students. Nonetheless, societal attitudes had
shifted and questions over access and affordability for a wider array of
students were common political discourses by the 1950s and 1960s
(Wilkinson, 2005). Political discourses about national security, Communism, and economic vitality coupled with discourses on the new role of the
government in student lending and the government began a focus on using
financial aid policy to advance political agendas.
Concerns Over
Price Fixing:
The Overlap
Group of 1958
52
The College Scholarship Service also encouraged the creation of cooperative relationships between institutions to aid in identifying the widest array
of students in need of financial assistance. Wilkinson (2005) noted that by
the mid-1970s at least 150 institutions were participating in twenty-four
collaborative groups supported by the College Scholarship Service. The
extent of the collaborations ranged from setting common financial aid
policies to setting equal prices for financial aid offers to students
(Wilkinson, 2005). The most enduring of such groups was The Overlap
Group formed in 1958 by agreements between nine Ivy League and fourteen other private and public institutions (Wilkinson, 2005). The groups
purpose was to limit the number of need-based scholarships offered
among partnering institutions and neutralize the effect of financial aid so
that a student may choose among Ivy Group institutions for non-financial
reasons (United States v. Brown University, 1993, 292-293). Institutional
representatives on the Overlap Group met annually to set the prices of

tuition and fees for students admitted to multiple institutions. The Ivy
League institutions saw this effort as a means of distributing scholarship
dollars among the greatest number of needy students by ensuring that no
one institution would offer more money to students with the highest test
scores. For three decades, the Overlap Group set prices for mutuallyaccepted students (Browning, 1992; Kreisler, 1991; Matlock, 1994).
The 1980s saw eroding public sentiment for rising college costs. Beginning in 1989, the Justice Department began investigating financial aid
practices of Overlap Group institutions and, in 1991, filed a complaint
alleging the institutions colluded in fixing tuition prices, a violation of the
Sherman Anti-Trust Act. The Justice Department filed their complaint
against the nine Ivy League institutions. The U.S. Court of Appeals for the
Third Circuit ultimately found that an anti-trust violation had indeed
occurred. The courts reasoning was founded upon the belief that the
Overlap Groups efforts to set prices at standard rates across all institutions eliminated price competition for outstanding needy students, allowing
Overlap Group institutions to set whatever tuition and fee prices they
wanted.
Eight of the nine institutions involved in the Overlap Group reached a
pre-trial settlement wherein they would not meet to set prices of tuition or
discuss financial aid of mutually-admitted students (Browning, 1992).
However, the Massachusetts Institute of Technology refused to settle and,
thus, faced a ten-day court hearing, which they ultimately lost. As a result
of this case, institutions would be allowed to share limited financial
information but would not be allowed to set prices for mutually-admitted
students or engage in other actions that effectively eliminated price competition.
The Overlap Group ceased to meet in 1991 and the practice of setting
standardized tuition and fee costs through similar groups discontinued
shortly thereafter. In 1992, President George H. W. Bush signed a reauthorization of a longstanding Act, allowing a two-year window for institutions
to establish information sharing consortia that would discuss student
financial aid on the basis of documented financial need only. Institutions
were not authorized to adjust prices based upon these discussions and
could not discuss individual students cases. The bill President Bush
reauthorized was not even in existence in 1958 when the Overlap Group
was formed. It has, however, been the most far-reaching piece of legislation guiding contemporary American higher education and student financial aid: The Higher Education Act of 1965.
The Higher
Education
Act of 1965
The Higher Education Act of 1965 was a highlight in President Lyndon

Johnsons legislative accomplishments and stands out as one of the seminal
moments in American higher education history (Cohen & Kisker, 2009;
Thelin, 2011). The Act cemented the federal governments involvement in
higher education and permanently established a philosophy of higher
education as an issue of national interest. The Higher Education Act also
established nine titles outlining the administrative structure for a variety of
53
programs in higher education, while also requiring institutions accepting

Title IV funds through students to adhere to recognized accreditation
standards and report data on institutional quality and operations. Title IV
of the Higher Education Act of 1965 provided for a guaranteed loan
program by backing the loans between student and private lenders with the
full faith of the federal government. Under early direct loan programs,
students borrowing money were doing so by borrowing U.S. Treasury
funds. In contrast, the 1965 act established a guaranteed loan program that
carried with it the full promise of the U.S. government to repay private
lenders if a student defaulted on their loan (Zumeta, 2001).
In the 1972 re-authorization of the Act, the institution-based philosophy
of supporting higher education was critically challenged and the studentbased intermediary model of lending became prevalent. The 1972 reauthorization established the Educational Opportunity Grants designed to support
access to higher education to students with the greatest financial need, and
the Guaranteed Student Loan Program, later known as the Stafford Loan,
through which the federal government paid interest payments for students
while they were enrolled in college. The 1972 reauthorization also initiated
the State Student Incentive Grant Program, offering matching funds to
state governments to encourage locally-meaningful, need-based aid programs. Within three years all fifty states actively participated in this program (Archibald, 2002).
Though the pattern for the federal, state, and institutional lending
relationship was relatively set by 1972, later reauthorizations did offer
equally important changes. The Higher Education Act has faced reauthorization in 1968, 1971, 1972, 1976, 1980, 1986, 1992, 1998, and 2008, with its
latest reauthorization expiring in 2013 and expected to be reauthorized in
2015 (American Association of State Colleges and Universities State
Relations and Policy Analysis Team, 2014). However, scholars have generally acknowledged that the 1972 reauthorization cemented the basic
charter of todays federal student aid system (Gladieux & Hauptman,
1995, p. 16), with students as the intermediaries of funds between the
federal government and institutions.
The 1980 reauthorization saw the proposal of a new form of federal aid
as a part of the Basic Educational Opportunity Grants Program. Unlike
federal lending programs, this student-based grant program, ultimately
named after Senator Claiborne Pell, did not require repayment and was a
substantial investment in the educational futures of low- and middleincome students. In 1980, Pell Grant recipients had to have total family
income of less than $25,000 annually, and nearly 2.7 million students took
advantage of this need-based grant program (Gladieux & Hauptman,
1995).
By 1980, institutions and students had a variety of choices in federal
financial aid. In 1988, Congress renamed the Federal Guaranteed Student
Loan program, which had grown to the largest loan program offered by
the federal government, to honor Vermont Senator Robert Stafford. The
Stafford Loan Program has been the major federal lending program almost
since its inception. In 1989, just one year after its re-designation as the
54
Stafford Loan Program, 26.8% of federal loans offered by the federal

government were Stafford Loans (Wei & Skomsvold, 2010). Moreover, the
prevalence of Stafford Loans as a portion of federal lending has steadily
grown throughout the programs existence. In 1989-1990 the Stafford
Loan Program accounted for 26.8% of all federal loans. By 2007-2008, the
percentage jumped to 45.5% (Wei & Skomsvold, 2010). This growth was
driven by rising costs in tuition and fees throughout the 1980s and 1990s.
Moreover, Wei & Skomsvold (2010) note a striking and historically persistent characteristic of the Stafford Loan program: A tendency for students
to take out loans at the maximum allowable amount. In any given year,
about sixty percent of students taking out Stafford Loans take out the
maximum amount they can (Wei & Skomsvold, 2010).
The Pell Grant and Stafford Loan programs solidified the federal
governments role in aid to students, ensuring access to higher education,
establishing expectations for institutional quality, and solidifying a loanbased approach to federal aid. However, throughout the 1970s and 1980s,
politicians and their constituents began questioning why federal resources
were not supporting the education of middle- and upper-class students
(Zumeta, 2001). The Middle-Income Assistance Act of 1978 widened the
availability of Pell Grant and Stafford Loan program eligibility to more
middle class families (U.S. Congress, 1978). However, a gap between
student aid for the middle class and college affordability was widening as
the cost of tuition began a decade-long period of triple digit percentage
increases (Zumeta, 2001). As the 1980s began, Ronald Reagan promised to
reduce college costs and financial aid policies would be the tools for
achieving this goal.
The Bennett
Hypothesis
President Regans Secretary of Education, William J. Bennett, was perhaps

the most vocal opponent of college spending and argued that colleges and
universities wereand had been for some timeincreasing tuition simply
because federal student aid was readily available. Much like Trumans
Commission Report, which highlighted profiteering in higher education in
the 1950s, Bennett (1986, 1987) argued that higher education institutions
hiked tuition costs by 6-to-8 percent each year for nearly a decade simply
because financial aid was available for the taking. Bennett further decried
institutional leaders who asserted that tuition costs were a result of reductions in state support of higher education. Naming specific, high-profile
presidents, Bennett questioned the data campus presidents had access to,
calling such claims of failing state support fallacies, myth, and lies
(Bennett, 1987).
Nonetheless, Bennetts arguments and rhetoric struck a nerve with many
political leaders, media outlets, and general citizens in the 1980s and 1990s
and fueled a growing societal distrust of higher education costs (Zumeta,
2001). Academic, political, and popular press outlets pushed Bennetts
argument and the notion that more federal aid led to increased tuition
costs has since been referred to as the Bennett Hypothesis. Since the 1980s,
educational researchers have sought to confirm or refute the Bennett
Hypothesis. Researchers have either found no relationship between
increasing federal support and increasing college tuition (Hoxby, 2004;
55
Singell & Stone, 2003), a delayed relationship between increased federal aid
and increased tuition (Smart, 2007), an immediate positive correlation
between federal aid and increasing tuition (McPherson & Schapiro, 1991),
or, in some instances, a direct, negative correlation between federal aid and
rising tuition costs (Singell & Stone, 2003). Zumeta (2001) offers a clear
synopsis on the matter, claiming that the Bennett Hypothesis does hold
some valid logic when viewed through traditional microeconomic theories,
though the scholarly literature and empirical evidence is divided on the
matter.
As the 1980s ended, much of the populist political rhetoric tarnishing
big government had abated (Zumeta, 2001). In the wake of Reagans call
for smaller, leaner, more fiscally conservative government, many social
welfare and mental health programs were severely limited or cut altogether.
However, many New Deal-era programsin particular, the G.I. Billwere
preserved, despite the calls for small government. Though student financial
aid was cut under Reagan, it was not cut as harshly as other programs or as
promised during the 1980 campaign (Roemer, 1985). Reagans 1982 and
1986 fiscal budget proposals both called for budget reductions of $2.3
billion of funds available for federal student lending programs (Roemer,
1985). However, Reagans 1980 promise to completely abolish the Department of Education was not realized and federal student aid programs
especially the Stafford and Perkins Loan Programsenjoyed marginal but
stable growth in terms of the number of students receiving aid and dollars
appropriated throughout the 1980s and early 1990s (Zumeta, 2001).
Nonetheless, the Bennett Hypothesis remains a popular ideaespecially in
legislative and popular media circlesdespite a lack of evidence supporting it (Hoxby, 2004), furthering the idea that government agendas have
surpassed student merit or needs as important in financial aid policy.
Fragmented
Programs of
the 1990s
56
The slow growth of federal student aid during the Reagan administration
was erased by unprecedented growth in lending during the 1990s. The
1990s were unique in that they began with the Presidency of Republican
George H.W. Bush, ended with the Presidency of Democrat Bill Clinton,
and were typified by periods of House and Senate majority opposition to
the President (Fiorina & Abrams, 2008; Hibbing & Theiss-Morse, 1995).
With each change in political philosophy, political parties fashioned federal
student aid programs based upon their political agendas. In 1993, Congress
and President George H.W. Bush increased a variety of federal loan
programs borrowing limits and implemented unsubsidized loans for
students with no demonstrated financial need. By 1990, an estimated 17%
more students had borrowed the maximum amount of their loan compared to 1980 (Wei & Skomsvold, 2010, p. 6). Thus, while enrollments did
increase into and throughout the 1990s (Synder, 1993), students were
borrowing the maximum allowable amount to finance their wider participation in vocational, technical, traditional, and professional education (Wei &
Skomsvold, 2010, p. 6). While only 43% of students borrowed the maximum amount allowed under the Stafford Loan program in 1990, 51% of
students borrowed the maximum amount in 1998 (Wei & Skomsvold,
2010, p. 6). This increase in both the maximum allowable loan limits and
the volume of loans being made led to a startling 22.5% default rate for
college loans in the 1990s, the highest of any decade since data began
being recorded (Austin, 2012; Gross, Cekic, & Hillman, 2009; Roots, 2000).
George H. W. Bushs Presidency was also characterized by a series of
economic and federal spending policy changes that had secondary effects
on student lending and grant programs. Chief among these were efforts to
reduce student loan default rates and redirect an increasingly complex and
out-of-control system of federal loans, two societal concerns of the time
(Zumeta, 2001). First, the Omnibus Budget Reconciliation Act of 1990
redesigned how federal loans (including federally guaranteed student loans)
were accounted and required a more clearly measured cost for the
federal subsidy of higher education. This provided new data and perspectives for political discourse and policies in Washington, D.C. Immediately,
Congressional leaders recognized that the federal system of guaranteeing
loans made by private lenders to studentsrather than directly lending
money to studentswas costly and burdensome. With the 1992 reauthorization of the Higher Education Act, Congress and President Bush established a pilot program of direct lending to students. Congress set its sights
on a conversion of the federal governments guaranteed loans to direct
lending programs. Ultimately, President Bush did not win reelection and
this conversion was left to his successor, President Bill Clinton.
President Clinton aggressively pursued a complete overhaul of the
federal financial aid system early in his first term. However, the process
was overwhelming and new phases of the program intended to pursue
long-range reform were lost to downsizing when the Republican Party
took control of Congress during the midterm election of 1994 (Fiorina &
Abrams, 2008). In 1993, the newly-elected President signed the Student
Loan Reform Act of 1993, establishing a target for the conversion of 60%
of federally guaranteed student loans to direct loans across the next five
years. The Act also amended the Higher Education Act to ease the loan
repayment process and reduce paperwork for students. Though some have
called the conversion to a direct lending program Clintons greatest success,
the Clinton administration was also able to reduce the interest rates on
student loans and, in 1997, enact tax credits for college expenses (Wei &
Skomsvold, 2010), equally impressive accomplishments.
The years following the enactment of most federal student loan changes
are characterized by increased participation in loan programs (Wei &
Skomsvold, 2010, p. 6). The Clinton era laws were not unique in this
regard. They were, however, unique in the sheer number of students who
took out loans directly from the federal government. Student and parent
borrowing jumped by almost $10 billion between 1993 and 1995nearly a
two-thirds increase in the dollars available for federal lending in just two
years (Gladieux & Hauptman, 1995).
While the 1990s would seem to be the decade of loan expansion, there
were also significant developments in college savings plans. For a considerable period of time prior to the 1990s, financial institutions and banks had
been offering long-term savings and investment products aimed at helping
families pay for growing costs of college. In 1996, section 529 of the
Internal Revenue Code of 1986 was authored to exempt qualified tuition
57
programs and college savings plans from taxation (Internal Revenue

Service, 2011). State and private programs were partnering with the federal
government, which offered tax abatements for programs that promoted
saving for college. The implied message of offering tax abatements for
savings at a time when loan programs were growing exponentially seems
duplicitous. The result, however, was profound. Prior to 1996, one state
(Michigan) had a tuition savings plan, and even it was questioned as a taxexempt entity in the judicial system. Between 1996 and 2000, thirty states
developed college tuition savings plans (Dynarski, 2004). Today all fifty
states have partnered with the federal government to offer college savings
plans. These plans eventually came to be known by the section of the tax
code which afforded them tax-exempt status: 529 College Savings Plans.
The 1990s were a watershed moment in the history of financial aid not
only because of the precipitous increase in the number of students taking
federal student aid but also because of the increasingly complex federal
role in regulating and expanding financial aid and the increased need to
save for college years in advance.
Current
Developments
and Discourses
in Student Aid
Influences of the political and economic atmosphere of the past decade

have been reviewed by scholars such as Eaton (2010), Hoxby (2004),
Singell and Stone (2003), and Smart (2007). The federal government
continued its tinkering or tuning approach with financial aid through
reauthorizations of the Higher Education Act. The Higher Education Act
was reauthorized in 2008, under the name The Higher Education Opportunity Act of 2008, and reinforced the governments and societys discontent with increasing college costs. The Act directed the Department of
Education to report the top five percent of institutions with the highest
tuition and fees and the highest net cost, and required institutions with the
highest increase in costs to report on how their leaders plan to cut costs.
To address the political agenda of limiting college costs and increasing
transparency, the 2008 reauthorization implemented institutional requirements for a net-price calculator, simplified lending and loan consolidation
practices, introduced new loan repayment and forgiveness opportunities,
and coordinated efforts of the Federal Family Educational Loan Program
and the Ensuring Continued Access to Student Loans Act of 2008. [For an
explanation of the impact of the Higher Education Opportunity Act of
2008 on financial aid, see the Council for Higher Education Accreditation
(2008) or Eaton (2010)]. Despite an increasingly complex and detailed
legislative history, the pattern of increased lending and maximum loan
awards remained constant following the 2008 reauthorization. Response to
the 2008 legislationand to the economic recession of 2008-2009was
an increase in both the number of students on federal aid and the average
loan amount taken out (Wei & Skomsvold, 2010; Zumeta, 2001).
The desire to leave a mark on higher education and student aid was not
exclusive to legislators. In September 2005, U.S. Department of Education
Secretary Margaret Spellings announced the creation of The Commission
on the Future of Higher Education. Secretary Spellings cited challenges
she had in finding information on tuition and costs for her daughters
upcoming college attendance to a private liberal arts college (Spellings,
2005). The Commission, which came to bear Spellings name, worked for
58
eleven months interviewing legislators, constituency groups, and a select

group of elite college presidents before authoring a report that outlined
five areas for improvement in higher education. The value of higher
education, affordability, access, accountability, and financial aid were the
primary areas the Spellings Commission targeted for further reform (The
Commission on the Future of Higher Education, 2006). Ruben, Lewis, &
Sandmeyer (2008) contended the recommendations in affordability, access,
and financial aid had the most lasting effects on higher education because
they provided a foundation for the principals underlying current higher
education policy discourse. Ruben, Lewis, & Sandmeyer (2008) and
Lederman (2007) argue that the Spellings Commission was an attempt to
change the political agendaand less successfully, the actionsof higher
education in America. In contrast, Robert Zemsky (2011), himself a
member of the Commission, opined that the Spelling Commission was a
grand adventure that ended with little more than a whimper (para. 1).
Ultimately, time will tell if the Spellings Commission will serve as a pattern
for priorities in higher education.
George W. Bush-era financial aid policies also were marked by two
programs that, though short-lived, further underscored governmental
focus on national security and economic competitiveness agendas. In 2006,
the U.S. Department of Education began offering Academic Competitiveness Grants (ACG) and the National Science and Mathematics Access to
Retain Talent (SMART) Grant Programs. These programs were designed
to meet the nations need for improved math and science instruction. The
Academic Competitiveness Grant program was targeted at Pell Grant
eligible students in their first and second year of college who completed
challenging courses in high school. In comparison, the SMART Grant
program was targeted at Pell-eligible students who took challenging
courses in high school and who were in their third and fourth year of
college and pursued majors in science, technology, engineering, mathematics, and specific foreign languages. The SMART Grant program again
opened the door to a major-based focus on federal aid first used in the
loans made to pre-service teachers through the National Defense Education Act of 1958. The SMART Grant programs focus was on supporting
students entering into majors that would hone Americas competitiveness
in a global economy. Though this renewed academic major-focused
approach to federal grants was short-lived, it did represent a contemporary
attempt by the federal government to influence the political agenda of
national economic viability through financial aid policy. In June 2011, the
U.S. Department of Education discontinued the ACG and the SMART
Grant programs (U.S. Department of Education, 2013a). Nonetheless, the
notion that federal aid programs should address employment needs in
specific majors had been renewed and may continue to dominate future
political discourses in higher education.
Loan
Forgiveness
and Predatory
Lending
Loan repayment programs were not created in the new millennium. States
had offered programs whereby veterans or professionals working for a
certain number of years in public service fields could have a certain
percentage of their loan debt expunged. The College Cost Reduction and
59
Access Act of 2007 reflected this sentiment by establishing a public service

loan forgiveness program that discontinued any remaining debt after ten
years of full-time employment in public service positions such as education, emergency personnel and law enforcement services, military service,
and government positions (U.S. Department of Education, 2013b). Such
efforts are reflections of the NDEA and governmental efforts to shape
the educated citizenry to respond to political priorities.
However, contemporary discourses on loan forgiveness have evolved to
be less focused on qualified repayment through professional service and
more akin to an entitlement program expected for all students (Toby,
2010). In 2012, the New York Times and other media outlets reported that
student loan debt had surpassed the one trillion dollar mark and began
speaking of higher education as a new sub-prime lending market or the
next bubble (Schlesinger, 2012). These notions were fed by fears of
another discourse unique to the 21st Century: predatory lending in higher
education. Rapid growth in for-profit education and questionable recruitment and lending practices in that sector were the subject of intense
congressional scrutiny in 2010 (Committee on Health, Education, Labor,
and Pensions, 2012). Sen. Tom Harkin of Iowa led a Senate Sub-Committee investigating allegations of predatory lending and tuition which increased dramatically as students neared completion of their degree. The
Committees report found that admissions officers at specific for-profit
institutions had promised potential students employment, licensure, and
other returns on investment in exchange for relatively high costs of
attendance. The report also notes for-profit institutions gladly took federal
student aid dollars and devoted a disproportionate share of their budgets
to advertising and recruitment. Criticism has also focused on practices that
targeted low-income, underprepared high school graduates or GED
recipients in an effort to capitalize on federal aid targeted at these special
populations.
These discourses and the U.S. housing market collapse of 2008-2009
fueled concerns that higher education was leading the country toward
another recession, or at least not contributing to economic recovery
(Schlesinger, 2012). Politicians were intent on avoiding the economic
calamities of the housing collapse. Moreover, the established precedence
of two major stimulus packages had many students wondering when they
would receive their bailout for student loans they had accrued during a
period when the value of higher education was under intense scrutiny
while the cost was high (Adamson, 2009). With the growth of student loan
debt past one trillion dollars, policy makers began arguing that this level of
debt had saddled young Americans with unrealistic levels of debt or had
shifted the nations sub-prime loan problems from one industry [housing]
to another [higher education] (Austin, 2012; Schlesinger, 2012). These
discourses have had deep and immediate impacts on student lending and
bolstered enthusiasm for a student loan bailout and across-the-board
loan forgiveness programs.
Sensing growing concerns, Michigan Representative Hansen Clarke
sponsored the Student Loan Forgiveness Act of 2012 (H.B. 4170). The Act
introduced a loan program known as the 10/10 forgiveness plan,
60
wherein a loan holder who had made 120 payments in the first ten years of
their loan would be forgiven the rest of their loan through cancellation or
federal backing of the remainder. Under the Act, loan forgiveness would
not be affected by student need, merit, or profession. The proposed act
also took strides to cap federal student loan interest rates, and offer
borrowers new avenues for refinancing student loans. However, the Act
has not gained bipartisan support as Republicans in the House oppose the
Democratically-introduced bill. Opposition to the bill noted the difficulty
of any student to make all 120 scheduled payments on their loan, further
citing that in 2012, 9.1% of students with federal loan debt defaulted on
their loans within two years (U.S. Department of Education, 2012; Wei &
Skomsvold, 2010). Opponents also note the likelihood that forgiving loans
without stifling the availability of future federal lending would only allow
students to further rack up debt. The Student Loan Forgiveness Act of
2012 has been under review with the House Committee on Higher Education and Workforce Training since March 2012. However, no additional
action is expected as the Bills sponsor, Clarke, faced re-districting, lost reelection in his primary election, and left Congress in January 2013. Still, the
ideals of loan forgiveness enjoy widespread support from college students
and in social and political media and will likely be a mainstay in political
discourse for years to come. The fact that loan forgiveness is being considered devoid of student need or merit, signal a departure from prior
discourses in financial aid and suggests that loan forgiveness has become a
political agenda of considerable clout.
Conclusion
As Adamson (2009) argued, Of all the transformations that have taken

place in the American university, perhaps the most radical is the shift
toward financing higher education through borrowed money (p. 97). The
aforementioned historical episodes demonstrate how aid to students
shifted from local, philanthropic efforts, to a complex federal system of
oversight that is as much a reflection on societal and political realities as it
is student need. In its present form, the federal approach to student
financial aid is an amalgam of state programs, federal programs and tax
credits, practices of private institutions, and programs of some private
foundations and charities (Archibald, 2002, p. 46). One consequence of
this complex structure is a bewildering maze of programs and options
that, due toinefficiencies, is predisposed to under-perform in meeting
students needs (p. 46). For most citizens outside the echelons of higher
education, this situation begs for reform.
Higher education and societal leaders have been engaged in an argumentative pattern about the types of reforms necessary for student aid programs since the earliest days of concerted aid programs. These arguments
have focused on the appropriateness of student need and merit in the
aiding students. As the history of financial aid evolved to be increasingly
driven by the federal government, so did the philosophy of using financial
aid to respond to specific political agendas, such as national security and
economic viability. Prior to the enactment of the G.I. Bill, financial aid was
primarily a local matter supported through philanthropy and an occasional
institutionally-generated loan program aimed at supporting student needs
and later, student merit. Contemporary higher education leaders face
61
politically-motivated challenges to demonstrate the return on massive

federal investments in higher education since the passing of the G.I. Bill in
1944 while also having to contend with the pragmatic and symbolic
ramifications of decreasing state support of higher education. Prior to the
Second World War, students were primarily responsible for charting and
paying for their own future. Contemporary contexts are such that most
students are primarily responsible for securing federal aid prior to pursuing
education and that financial aid policy is directly influenced by political
agendas and legislative priorities. In light of such massive federal involvement in student lending, higher education leaders are now faced with new
challenges in describing nuanced, innovative, and tangible benefits of
earning a college degree.
Across the history of financial aid, one sees an evolution away from
local, citizen-initiated philanthropy, to moderate government control and
coordination, and, finally, to full federal oversight and financing of a
massive and complex system of financial aid. Paralleling this shift is an
evolution in the philosophy of aiding students based upon their need, their
merit, and ultimately the political agendas of the day. This system has
indeed opened the campus gates to millions of Americans. The tradeoff
of this access has been increased student debt, increased competition for
jobs, and an entrenched sense of entitlement to financial aid. As a result,
the current system of higher education has become a complex system
seeking to provide for the needs of all students and politicians; a task that
would seem foreign and impossible to college students, their parents, and
social leaders of a few generations ago. This evolution has also made
financial aid policies susceptible to political and societal shifts and has
made for an unstable reality and ever-growing malaise of seemingly spur
of the moment policy changes. Institutions have seen the erosion of their
autonomy and public faith. Simultaneously, institutions face a quandary
about how to finance quality education and remain competitive in such a
complex and increasingly expensive world. The evolution of financial aid
from a local philanthropic system that services student needs to a federal
system serving political agendas is a story of students, parents, citizens,
lawmakers, and higher education leaders responding to societal, political,
and personal contexts. Financial aid will continue to be driven by these
contexts and will be a defining factor of future higher education discourses. Developments in financial aid will not only influence patterns in
debt and enrollment, but will also influence institutional quality, leadership,
organizational structure, physical environment, and many social economic
phenomena. Those involved in financial aid will continue to face everchanging programs and complex political realities as they strive to support
students in their pursuit of higher education.
62
Nexus: Connecting Research to Practice
Financial aid in the US owes its beginnings to European models,

with local and philanthropic roots. Yet, in the United States
financial aid evolved from local citizen-led charity, to moderate
government oversight, to strong federal oversight. For practitioners this historical context helps explain the sometimes competing purposes of financial aid as well as the complex interplay of
local, institutional, state, and federal programs.
Military pensions would influence latter developments in financing civilian students education. Moreover, the forms of accountability and bureaucracy associated with financing soldiers
education was a pattern for civilian students aid programs as
well. For practitioners this means that the historical evolution of
financial aid has been about opening educational doors for
targeted groups (e.g., veterans, People of Color, women).
The historical development of a federal financial aid system

helped open the doors of higher education for many, but also
required significant bureaucracy. Practitioners navigate federal
financial aid laws every day, but should remain cognizant of the
trade off.
Endnote
The Veterans Readjustment Assistance Act of 1952 3695 Pub. L. 550.
38 U.S.C. 3695.
1
63
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A History of Financial Aid to Students

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A History of Financial Aid to Students

Colleges, universities, and the communities they serve have always

he National Center for Educational Statistics (2012) estimated that

Journal of Student Financial Aid

Volume 44 Number 1 2014

These analyses better situate financial aid practitioners in understanding

Understanding how professors were paid offers key considerations in

National Association of Student Financial Aid Administrators

Journal of Student Financial Aid

Volume 44 Number 1 2014

These religious foundations of patronage shaped the way colleges,

The American system of higher education continued the tradition of

National Association of Student Financial Aid Administrators

colleges operating west of the former colonial territories (Wilkinson,

Transformation of the American way of life was unbridled from the

Journal of Student Financial Aid

Volume 44 Number 1 2014

The period from 1870 to 1945 was characterized by transformations in

National Association of Student Financial Aid Administrators

Concurrent with developing scholarship and loan systems, a system of

That the Servicemens Readjustment Act of 1944, more commonly known

Volume 44 Number 1 2014

Journal of Student Financial Aid

Volume 44 Number 1 2014

coordinated effort. Instead, it focused on the needs of racial minorities

National Association of Student Financial Aid Administrators

The National Defense Student Loan System also formalized a loan

Volume 44 Number 1 2014

representatives on the Overlap Group met annually to set the prices of

The Higher Education Act of 1965 was a highlight in President Lyndon

National Association of Student Financial Aid Administrators

programs in higher education, while also requiring institutions accepting

Journal of Student Financial Aid

Volume 44 Number 1 2014

Stafford Loan Program, 26.8% of federal loans offered by the federal

President Regans Secretary of Education, William J. Bennett, was perhaps

National Association of Student Financial Aid Administrators

Volume 44 Number 1 2014

programs and college savings plans from taxation (Internal Revenue

Influences of the political and economic atmosphere of the past decade

Journal of Student Financial Aid

Volume 44 Number 1 2014

eleven months interviewing legislators, constituency groups, and a select

National Association of Student Financial Aid Administrators

Access Act of 2007 reflected this sentiment by establishing a public service

Journal of Student Financial Aid

Volume 44 Number 1 2014

As Adamson (2009) argued, Of all the transformations that have taken

National Association of Student Financial Aid Administrators

politically-motivated challenges to demonstrate the return on massive

Journal of Student Financial Aid

Volume 44 Number 1 2014

Nexus: Connecting Research to Practice

Financial aid in the US owes its beginnings to European models,

The historical development of a federal financial aid system

National Association of Student Financial Aid Administrators

Journal of Student Financial Aid

Volume 44 Number 1 2014

Council for Higher Education Accreditation. (2008, September 19).